QQQH Is Not Broken, The Market Path Is
Amid hopes that the conflict in Iran will soon de-escalate, stocks rallied in recent days. This provided some much needed relief for the growth-heavy Nasdaq-100 Index (NDX).
NEOS Nasdaq-100 Hedged Equity Income ETF often fails as a defensive tool, capturing significant market losses despite its purported "trap door." Selling puts creates a "wildcard" risk; if the Nasdaq-100 drops below the strike price of those puts, QQQH remains fully exposed. The strategy prioritizes monthly distributions, often sacrificing principal recovery and failing my "Avoid Big Loss" investment rule.
NEOS Nasdaq-100® Hedged Equity Income ETF is a fund that uses covered calls and other options to generate a 9% yield from the NASDAQ-100, an index that yields only 0.45%. The fund employs a put spread collar strategy, balancing premium income generation with capped upside—well-suited for today's frothy market. Current NASDAQ-100 constituents are high-quality and (for the most part) growing quickly. But at 40 times earnings, much of their future growth is being paid for.
Advisors and investors familiar with the famed Nasdaq-100 Index (NDX) and the various ETFs tracking that gauge know the benchmark and the related funds have delivered stellar long-term gains due in large part to outsized exposure to large-cap technology stocks. One thing NDX is not known for is income.
NEOS Nasdaq-100 Hedged Equity Income ETF offers a 9% yield with monthly, tax-efficient distributions and partial downside protection via a put spread strategy. QQQH directly holds Nasdaq-100 constituents, providing exposure to top tech names, but caps upside growth due to its out-of-the-money option writing approach. The fund underperforms QQQ in strong bull markets and during rapid, deep pullbacks, making it best suited as an income-focused, complementary holding.
October is half over. To this point, the 2025 edition of the tenth month of the year hasn't produced catastrophic equity market crashes as past Octobers have.
Advisors and investors feeling a degree of uncertainty about U.S. growth and tech stock performance looking ahead would do well to consider the NEOS Nasdaq-100 Hedged Equity Income ETF (QQQH). The fund generates notable performance while offering downside mitigation in challenging market environments.
Ongoing trade war and geopolitical tensions kicked off the final month of the first half as market volatility rose once more. In this year's environment of uncertainty and heightened risks, investors would do well to consider hedged strategies for their equity portfolios.